Bluestone Market Research

TAX RECEIPT DECLINE CAN’T ALL BE DUE TO SHUTDOWN

FAST FACTS ABOUT TODAY’S ECONOMIC DATA:

* U.S. tax receipts start out 2019 in the red, and it can’t all be shutdown related.

* Chicago and Dallas Fed indices improved.

U.S. TAX RECEIPTS DOWN -10% Y/Y IN 1H JANUARY-THIS CAN’T ALL BE DUE TO THE SHUTDOWN:

According to the U.S. Treasury, tax receipts are down -10.3% Y/Y through January 24th.  Furthermore, overall tax receipts are down -2.9% Fiscal YTD Y/Y (versus -0.7% at the end of December).  The decline in the month was led by Income and Employment Withholdings Taxes, which declined -13.7% Y/Y and -3.2% Fiscal YTD Y/Y (+0.1% Y/Y at the end of December).   It is important to note that we are in the second year of the Trump tax cut, so we can no longer claim that taxes are down on a Y/Y basis due to tax law changes.  So something else appears to be up in early January, and taxes are down far more than would be expected due to the shutdown.   We’ll want to monitor this data. 

Note that Corporate Income Taxes also declined -7.4% Y/Y and -20.7% Fiscal YTD Y/Y (versus -22.2% Y/Y at the end of December).  On the other hand, Excise & Other Taxes increased +20.5% Y/Y and +28.5% Fiscal YTD Y/Y (+33.1% Y/Y at the end of December).  This is a sign that transaction-based taxes are up significantly, which in part can be explained due to higher tariffs.

 

 

CHICAGO FED NATIONAL ACTIVITY INDEX IMPROVED ONCE AGAIN IN DECEMBER:

According to the Federal Reserve Bank of Chicago, the Chicago Fed National Activity Index (CFNAI) improved +0.06 points to +0.27 in December.  In fact, this is the seventh consecutive positive month and the highest level since August Thus, the three-month average increased +0.04 points to +0.16.  The improvement in the month was led by Production & Income (+0.20 points to +0.22) and Employment (+0.01 points to +0.11).  Conversely, there were declines in Sales (-0.12 points to 0.0) and Personal Consumption and Housing (-0.03 points to -0.06).

 

 

DALLAS FED MANUFACTURING INDEX TURNED POSITIVE IN JANUARY:

Today, the Dallas Federal Reserve reported that the Current General Business Activity Index rebounded +6.1 points to +1.0 in January Thus, the index returned to growth, albeit marginally.   The increase in the month was led by Production (+7.2 points to +14.5), Capacity Utilization (+7.2 points to +14.8), Shipments (+5.3 points to +11.4), Unfilled Orders (+2.5 points to +0.2), and Inventories (+3.5 points to +5.4).  However, it should be noted that there were declines in New Orders (-2.8 points to +11.6), Growth of New Orders (-4.6 points to +0.2), Number of Employees (-4.4 points to +6.6), and Average Workweek (-1.4 points to +3.6).   Lastly, manufacturers had a significantly more positive business outlook, as the Forecast increased +8.5 points to +11.7, with double-digit gains in Forecasts for Production, Capacity Utilization, New Orders, and Employment.

 

 

AMERICAS:

U.S. GDP:  Our GDP model sees GDP growth downshifting back to 2% in 2019.  Our model doesn’t factor in the stimulus from the recent tax cut, so the growth reversal in 2019 could be more pronounced than our model appreciates (it is presumed that 2018 will be better than our model due to the tax cut, whereas the delta for 2019 would be worse than our model predicts).

U.S. Inflation:  U.S. inflation appears to have hit a peak three months ago and with oil prices down and the dollar index up, we believe inflation has peaked for now. 

U.S. Federal Reserve:  With inflation and GDP slowing, the FOMC shouldn’t have hiked.  Period.  We think the Fed is out of the way for most of 2019, unless the jobs market stays hot.   And if the jobs market stays hot, then we won’t mind a couple more hikes.

U.S. Treasuries:  The trade war and recent movement toward a Fed Pause have pushed longer-term rates lower.   But we still believe economic fundamentals support a 10-year yield of approximately 3%, particularly if the Fed pauses.   We expect that rates will slowly drift higher again, as a Fed pause will ultimately lead to a weakening in the U.S. Dollar (which may have already begun).

U.S. Equities and Earnings:  S&P 500 operating earnings are still rising, but the market seems to be repricing forward earnings.  Our 2019 SPX operating earnings estimate is currently below the street at $165.  We have concerns about the flattening yield curve, the Fed’s current tightening cycle, and also the damage that may occur from further declines in energy prices.

Argentina:  The macro looks abysmal in Argentina, and recession was confirmed in Q3.  Note that things have worsened as November data showed that Industrial Production was down -13.3% Y/Y and Construction was down -15.9% Y/Y.  Argentina should be thankful that the IMF is involved because inflation is at a lofty 45.5%, Consumer Confidence has been deteriorating for a year, imports are down -27.1% Y/Y, and Unemployment is still a lofty 9%.

Brazil:  We are monitoring Brazil for a possible upgrade  Following Brazil’s election, Consumer Confidence has turned higher and PMI’s have indicated a return to growth.  We are encouraged by recent developments, but with the Bovespa at record highs, we need to see more follow-through with macro data.  Currently, Retail Sales are up +4.4% Y/Y and PMI’s are showing very modest improvement at 52-ish levels; however, GDP is up just 1.3% Y/Y, Industrial Production is down -0.9% Y/Y, and Unemployment continues to be elevated (11.6% in November, which confirms further slow improvement).

Canada: Canada’s housing market continues to weaken, but so far monthly GDP continues to trend at 2% Y/Y.  We have concerns for Canada’s outlook given declining oil prices (and slowly weakening PMI) and we wonder how long Canada’s employment market can remain so resilient.  

Mexico: Mexico’s macro data is mixed, but PMI’s are beginning to slip (both PMI’s broke below “50” in December).  Recall that Mexico was hiking rates alongside the U.S. to keep the currency stable.  With PMI’s breaking down, Unemployment rising, Industrial Production down -1.3% Y/Y, and consumer confidence starting to show some small signs of deterioration, we’ll want to keep an eye on Mexico for downside risk.

Venezuela: Remains uninvestable.

EMEA:

United Kingdom:  BREXIT is a mess and until that is solved the U.K. is uninvestible.  We have reached the point where persistent uncertainty will have negative impacts on business decisions and economic growth. The macro data remains mixed.   Unemployment Rate improved to 4.0% and PMI’s improved in December, but Industrial Production fell -1.5% Y/Y in November.  GDP is growing at just 1.5% Y/Y and there are some concerns building about the housing market.

European Union:  Economic Sentiment is turning lower, PMI’s are now at multi-year lows, Industrial Production is down -3.3% Y/Y, and the political situation is worsening again.  The events in Italy foreshadow possible macro risks for Europe, as monetary accommodation is removed.  We still believe Europe is uninvestible.  

European Central Banks:  The ECB is slowly removing accommodation but Mario Draghi hasn’t given a timeline for raising rates.  The recent decline in CPI gives the ECB little reason to hike in 2019

Eastern Europe: Ukraine situation aside, we saw earlier in the year with Italy, nations with high debt levels can rapidly become front-burner macro items.  The same can be said for Eastern Europe, given high Debt/GDP levels, most notably Cyprus (104%), Croatia (88%, up from 66% at the end of 2013), and Slovenia (81%).   We also have the EU Article 7 issues against Hungary and Poland to watch as well.  The world is turning farther right, and pressure from unelected EU leaders will only push these nations further right.

South AfricaReal GDP was growing at just +1.1% in Q3 and recent data suggest South Africa is heading lower once again.  PMI’s are wavering around the critical “50” level, electricity use and production is worsening (production is now negative), inflation is slowly turning up, unemployment is an abomination at 27.5%.  In our view, the mere risk of having assets appropriated will grind foreign capital commitments and new business investment to a screeching halt, and more time is going to need to pass in order for foreign investors to feel any degree of confidence.  Our best guess is that more downside exists for South Africa’s economy and we believe the currency and equity market will suffer as a result.

Turkey:  Remains uninvestable.

ASIA / PACIFIC:

Australia:  The Australian data remain mixed but we have serious concerns about China exposures and weakness in housing markets.  With that in mind, we have a short view on Australian equities.  So far, the macro remains OK as the Unemployment Rate appears to be stable around 5.0%, Real GDP increased +2.8% Y/Y in Q3, Exports are up +21% Y/Y, Wages are up +2.3% Y/Y, PMI’s have improved, and Consumer Sentiment has ticked slightly higher recently.  However, Retail Sales slowed to +2.8% Y/Y, consumer credit remains elevated, and the value and number of home loan approvals and permits have turned negative, which is a bad sign as home prices have turned negative as well.

China:   The manufacturing sector looks to be in recession, yet services have shown signs of improvement.  China is certainly stimulating lending and has lowered reserve requirements, but more debt generally isn’t a good prescription for having too much debt.   We are watching China for signs of spillover into the consumer, which we do indeed will come to fruition.

India:  Indian economic activity appears strong, GDP finished 2018 at +6.7% Y/Y and the initial estimate for 2019 is an acceleration to 7.2%.  That being said, recent PMI’s slowed slightly in December.   We are watching India for reasons to upgrade as inflation is moderating, the consumer is strong, Commercial Credit is roaring at +14.5% Y/Y, and M3 money growth has been steady at 10%.  However, industrial production slowed to +0.5% Y/Y, exports slowed to +0.3% Y/Y and imports are down -2.4% Y/Y.

Indonesia:  Indonesia had gone four years without raising rates, but now rates have been hiked +125bps since Mid-April.   Indonesia’s GDP and Private Consumption Expenditures are up over +5% Y/Y, Consumer Confidence has been stable, Manufacturing PMI had been stable in the 49-51 range for a year and slowed to 50.4 in October, Industrial Production rebounded +9.0% Y/Y, and Retail Sales are up +7.7% Y/Y.  However, Exports are now down -4.6%.

Japan:  Although we are encouraged by Prime Minister Abe’s promise to fix social security, immigration, and workforce participation, recent data has weakened (PMI’s, Leading Indicators, Consumer Confidence).

Russia: Russia just can’t help itself.   The sanctions and declining oil prices are having an impact on Russia and Russia is up to its antics again with Ukraine.  We find Russia uninvestible at this time.

South KoreaWhile the world looks forward to peace on the Korean Peninsula, we are keeping an eye on trade data into China.   Note that overall S.K. exports were up +22.7% Y/Y in October but are now down -1.2% Y/Y (December).   Bad trade data isn’t good for South Korea because GDP was already just +2.0% Y/Y in Q3, Mfg PMI is already below “50”, and Industrial Production is only up +0.1% Y/Y, the Unemployment Rate improved to 3.8%.   Note that Retail Sales slowed to +2.8% Y/Y in November (versus +7.5% Y/Y prior).

MACRO TRADE IDEAS:

 

 

GLOBAL CENTRAL BANK SCORECARD:

 

 

WEEK IN REVIEW – BEST & WORST PERFORMERS:

S&P 500 SECTOR PERFORMANCE:

 

 

BEST/WORST PERFORMING WORLD BOND MARKETS:

 

 

BEST/WORST PERFORMING GLOBAL STOCK MARKETS:

 

 

CURRENCIES PERFORMANCE:

 

 

COMMODITIES MARKET PERFORMANCE:

 

 

MAJOR GLOBAL STOCK MARKETS:

 

 

MAJOR GLOBAL BOND MARKETS:

 

BUYERS’ STRIKE HIT HOUSING AND STOCKS IN DECEMBER

FAST FACTS ABOUT TODAY’S ECONOMIC DATA:

* Existing Home Sales put up a clunker in December (down -10% Y/Y).

* German ZEW Confidence remains depressed, but improved in December.

* Still no BREXIT fallout in the U.K. Job Market as unemployment improved.

* Mexico risks remain elevated as unemployment begins to turn up.

EXISTING HOME SALES DOWN -10% Y/Y:

It appears that the December buyers’ strike didn’t just hit the stock market.  According to the National Association of Realtors, Existing Home Sales for the first time in three months, down -6.4% M/M at a Seasonally-Adjusted-Annual-Rate of 4.99 million homes in December.  However, on a Y/Y basis, existing home sales are now down -10.3% Y/Y (versus -6.8% prior), which is the slowest pace since May 2011.  Geographically, there were declines across the United States: the Midwest (-11.2% M/M), the Northeast (-6.8% M/M), the South (-5.4% M/M), and the West (-1.9% M/M).

Lawrence Yun, NAR chief economist, said, “The housing market is obviously very sensitive to mortgage rates.  Softer sales in December reflected consumer search processes and contract signing activity in previous months when mortgage rates were higher than today. Now, with mortgage rates lower, some revival in home sales is expected going into spring.”

 

EXISTING HOME PRICES DOWN ONCE AGAIN:

Also, Median Existing Home fell for the fifth time in six months, down -1.4% M/M and slowed to +2.9% Y/Y to $253,600 in December (+4.1% Y/Y prior).   Furthermore, the Mean Existing Home Price also fell for the fifth time in six months, down -1.1% M/M and slowed to +1.6% Y/Y to $292,800 (+2.2% Y/Y prior).  Note, the average 30-year conventional commitment rate fell -23bps to 4.64%.  In December, total inventory fell for the sixth consecutive month, down -10.9% M/M to 1.55 million homes and months’ supply fell to 3.7 months (3.9 months prior).  Also, all-cash sales were 22% of transactions in December (21% prior).   Moreover, first time home buyers accounted for 32% of sales (versus 33% previously) and the average listing lasted 46 days (up from 42 days prior).

 

GERMAN ZEW CONFIDENCE IMPROVED BUT REMAINS DEPRESSED IN JANUARY:

According to the ZEW Center for European Economic Research, German Economic Expectations improved +2.5 points to -15.0 in the month of January.  Nonetheless, this is the 10th consecutive negative reading.  Furthermore, the Eurozone Economic Expectations improved +0.1 point to -20.9 but the ZEW USA Economic Expectations index fell -6.1 points to -38.4.  Lastly, the Current Economic Situation for Germany declined for the fourth consecutive month, down -17.7 points to 27.6 (lowest level since January 2015) and the Current Economic Situation for the EU declined -6.8 points to 5.3 (lowest level since February 2017).

 

 

U.K. UNEMPLOYMENT RATE FELL TO 4.0% THANKS TO RECORD EMPLOYMENT IN NOVEMBER:

According to the U.K. Office for National Statistics, the unemployment rate in the U.K. improved to 4.0% in the month of November (4.1% prior).  In the month, total employment increased +59k to a record high 32.535 million, with full-time employment up +53k to 24.021 million and part-time employment up +6k.  Furthermore, it should also be noted that total unemployment slipped -8k to 1.372 million.

 

 

MEXICAN UNEMPLOYMENT RATE AT HIGHEST LEVEL IN 2 YEARS:

According to INEGI, Mexican Unemployment Rate increased to 3.57% (seasonally adjusted) in the month of December (versus 3.31% prior).  In fact, this is the highest level since December 2016.  In the month, the unemployment rate for male workers increased to 3.43% (3.15% prior); however, the unemployment rate for female workers improved to 3.24% (versus 3.44% prior).  Lastly, it should be noted that the not-seasonally adjusted unemployment rate increased slightly to 3.35% (3.26% prior) and it is up significantly versus 3.13% in December 2017.

 

CHINA TRADE SHOWS WEAK GROWTH, BUT NOT RECESSION

FAST FACTS ABOUT TODAY’S ECONOMIC DATA:

* China trade surplus improved as exports declined less than imports.

* China cumulative trade is still up +12.6% Y/Y.  

* China’s oil imports surged in December, which suggest China’s economy is still growing.

* In Yuan terms China’s imports are down -2.8%, not as bad as USD terms (-7.6%).

* E.U. Industrial Production down -3.3%.   How long before we can call it a recession in Europe?

* As for U.S. Gov’t Shutdown, it’s now the longest on record and will ultimately impact growth.

CHINA TRADE SURPLUS IMPROVED BUT EXPORTS FELL -4.4% Y/Y IN DECEMBER:

In U.S. Dollar terms, China’s National Bureau of Statistics reported that China’s trade balance increased +$15.2 billion to +$57.06 billion in December.   However, the reason the trade balance improved in the month was due to the fact that China imports plunged -$18.28 billion M/M to $164.19 billion; therefore, imports declined -7.6% Y/Y (versus +2.9% prior).

 

 

Moreover, China exports fell -$3.08 billion M/M to $221.25 billion and they are now down -4.4% Y/Y (versus +3.9% Y/Y prior).  Nonetheless, Cumulative trade in 2018 increased +12.6% Y/Y to $4.623 trillion, which is a slight slowdown form +14.6% Y/Y prior.

 

 

Note, exports to the U.S. declined -3.5% Y/Y (+9.8% Y/Y prior), exports to the EU declined -0.3% Y/Y (+6.0% Y/Y prior), exports to the Hong Kong plunged -26.0% Y/Y (+2.7% Y/Y prior), exports to Japan declined -1.0% Y/Y (+4.8% prior), but exports to Russia increased +12.2% Y/Y (+2.9% Y/Y prior).  Lastly, Crude Oil imports increased to 43.78 million metric tons (+29.9% Y/Y versus +15.7% Y/Y prior) but Copper Ore imports fell -11.3% Y/Y (-4.5% Y/Y prior) in December.   The improvement in oil imports tells us that despite overall weakness in trade and bad manufacturing data, it’s unlikely that China has entered a recession.

 

 

 Note that China’s imports are down -2.8% in Yuan terms, which gives us a sense of how the economy may be fairing in local terms.   Note that imports are down in local currency terms, but not nearly as bad at the -7.6% Y/Y level reported in U.S. Dollar terms.

 

 

 EU INDUSTRIAL PRODUCTION DOWN -3.3% Y/Y IN NOVEMBER:

According to Eurostat, industrial production in the Euro Area declined -1.69% M/M in November.  Note that the prior month was revised lower to +0.09% M/M versus +0.19% M/M previously reported.  On a year over year basis, industrial production in the Euro Area declined -3.3% Y/Y when adjusted for working days (versus +1.2% Y/Y prior).  In the month, Euro Area Durable goods output fell -1.7% M/M, Non-Durable goods output fell -1.0% M/M, Capital Goods output fell -2.3% M/M, Intermediate Goods output fell -1.2% M/M, and Energy output fell -0.6% M/M.  Lastly, Eurozone output declined -1.3% M/M and -2.2% Y/Y (+1.3% Y/Y prior).

 

 

AMERICAS:

U.S. GDP:  Our GDP model sees GDP growth downshifting back to 2% in 2019.  Our model doesn’t factor in the stimulus from the recent tax cut, so the growth reversal in 2019 could be more pronounced than our model appreciates (it is presumed that 2018 will be better than our model due to the tax cut, whereas the delta for 2019 would be worse than our model predicts).

U.S. Inflation:  U.S. inflation appears to have hit a peak three months ago and with oil prices down and the dollar index up, we believe inflation has peaked for now.   

U.S. Federal Reserve:  With inflation and GDP slowing, The Fed shouldn’t have hiked.  Period.  We think the Fed is out of the way for most of 2019, unless the jobs market stays hot.   And if the jobs market stays hot, then we won’t mind a couple more hikes.

U.S. Treasuries:  The trade war and recent movement toward a Fed Pause have pushed longer-term rates lower.   But we still believe economic fundamentals support a 10-year yield of approximately 3%, particularly if the Fed pauses.   We expect that rates will slowly drift higher again, as a Fed pause will ultimately lead to a weakening in the U.S. Dollar (which may have already begun).

U.S. Equities and Earnings:  S&P 500 operating earnings are still rising, but the market seems to be repricing forward earnings.  Our 2019 SPX operating earnings estimate is currently below the street at $165.  We have concerns about the flattening yield curve, the Fed’s current tightening cycle, and also the damage that may occur from further declines in energy prices.

Argentina:  The macro looks abysmal in Argentina, and recession was confirmed in Q3.  Note that things have worsened as November data showed that Industrial Production was down -13.3% Y/Y and Construction was down -15.9% Y/Y.  Argentina should be thankful that the IMF is involved because inflation is at a lofty 47%, Consumer Confidence has been deteriorating for a year, imports are down -29.2% Y/Y, and Unemployment is still a lofty 9%.

Brazil:  We are monitoring Brazil for a possible upgrade  Following Brazil’s election, Consumer Confidence has turned higher and PMI’s have indicated a return to growth.  We are encouraged by recent developments, but with the Bovespa at record highs, we need to see more follow-through with macro data.  Currently, GDP is up just 1.3% Y/Y, Industrial Production is up just +1.1% Y/Y, Retail Sales are up +1.9% Y/Y, PMI’s are showing very modest improvement at 52-ish levels, and Unemployment continues to be elevated (11.6% in November, which confirms further slow improvement).

Canada: Canada’s housing market continues to weaken, but so far monthly GDP continues to trend at 2% Y/Y.  We have concerns for Canada’s outlook given declining oil prices (and slowly weakening PMI) and we wonder how long Canada’s employment market can remain so resilient.  

Mexico: Mexico’s macro data is mixed, but PMI’s are beginning to slip (both PMI’s broke below “50” in December).  Recall that Mexico was hiking rates alongside the U.S. to keep the currency stable.  With PMI’s breaking down, Retail Sales slowing, Industrial Production negative, and consumer confidence starting to show some small signs of deterioration, we’ll want to keep an eye on Mexico for downside risk.

Venezuela: Remains uninvestable.

EMEA:

United Kingdom:  BREXIT is a mess and until that is solved the U.K. is uninvestible.  We have reached the point where persistent uncertainty will have negative impacts on business decisions and economic growth. The macro data remains mixed.   PMI’s improved in December, but Industrial Production was negative Y/Y in November.  GDP is growing at just 1.5% Y/Y and there are some concerns building about the housing market.

European Union:  Economic Sentiment is turning lower, PMI’s are now at multi-year lows, Industrial Production is negative and the political situation is worsening again.  The events in Italy foreshadow possible macro risks for Europe, as monetary accommodation is removed.  We still believe Europe is uninvestible.  

European Central Banks:  The ECB is slowly removing accommodation but Mario Draghi hasn’t given a timeline for raising rates.  The recent decline in CPI gives the ECB little reason to hike in 2019

Eastern Europe: Ukraine situation aside, we saw earlier in the year with Italy, nations with high debt levels can rapidly become front-burner macro items.  The same can be said for Eastern Europe, given high Debt/GDP levels, most notably Cyprus (104%), Croatia (88%, up from 66% at the end of 2013), and Slovenia (81%).   We also have the EU Article 7 issues against Hungary and Poland to watch as well.  The world is turning farther right, and pressure from unelected EU leaders will only push these nations further right.

South AfricaReal GDP was growing at just 1.1% in Q3 and recent data suggest South Africa is heading south again.  PMI’s are bouncing around the critical “50” level, electricity use and production is worsening (production is now negative), inflation is slowly turning up, unemployment is an abomination at 27.5%.  In our view, the mere risk of having assets appropriated will grind foreign capital commitments and new business investment to a screeching halt, and more time is going to need to pass in order for foreign investors to feel any degree of confidence.  Our best guess is that more downside exists for South Africa’s economy and we believe the currency and equity market will suffer as a result.

Turkey:  Remains uninvestable.

ASIA / PACIFIC:

Australia:  The Australian data remain mixed but we have serious concerns about China exposures and weakness in housing markets.  With that in mind, we have a short view on Australian equities.  So far, the macro remains OK as the Unemployment Rate appears to be stable around 5.0%, Real GDP increased +2.8% Y/Y in Q3, Exports are up +20% Y/Y, Wages are up +2.3% Y/Y, Retail Sales are up +3.6% Y/Y, PMI’s have improved, and Consumer Sentiment has ticked slightly higher recently.  However, consumer credit remains elevated and the value and number of home loan approvals and permits have turned negative, which is a bad sign as home prices have turned negative as well.

China:   The manufacturing sector looks to be in recession, yet services have shown signs of improvement.  China is certainly stimulating lending and has lowered reserve requirements, but more debt generally isn’t a good prescription for having too much debt.   We are watching China for signs of spillover into the consumer, which we do indeed will come to fruition.

India:  Indian economic activity appears strong, GDP finished 2018 at +6.7% Y/Y and the initial estimate for 2019 is an acceleration to 7.2%.  That being said, recent PMI’s slowed in December.   We are watching India for reasons to upgrade as inflation is moderating, industrial production is up +8.1% Y/Y, the consumer is strong, Commercial Credit is roaring at +15.1% Y/Y, and M3 money growth has been steady at 10%.  With inflation cooling a little, India can let growth occur and we are considering an upgrade.

Indonesia:  Indonesia had gone four years without raising rates, but now rates have been hiked +125bps since Mid-April.   Indonesia’s GDP and Private Consumption Expenditures are up over +5% Y/Y, Consumer Confidence has been stable, Manufacturing PMI had been stable in the 49-51 range for a year and slowed to 50.4 in October, Industrial Production rebounded +9.0% Y/Y, and Retail Sales are up +7.7% Y/Y.  However, Exports are now down -3.3%.

Japan:  Although we are encouraged by Prime Minister Abe’s promise to fix social security, immigration, and workforce participation, recent data has weakened (PMI’s, Leading Indicators, Consumer Confidence).

Russia: Russia just can’t help itself.   The sanctions and declining oil prices are having an impact on Russia and Russia is up to its antics again with Ukraine.  We find Russia uninvestible at this time.

South KoreaWhile the world looks forward to peace on the Korean Peninsula, we are keeping an eye on trade data into China.   Note that overall S.K. exports were up +22.7% Y/Y in October but are now down -1.2% Y/Y (December).   Bad trade data isn’t good for South Korea because GDP was already just +2.0% Y/Y in Q3, Mfg PMI is already below “50”, and Industrial Production is only up +0.1% Y/Y, the Unemployment Rate improved to 3.8% in November.   Note that Retail Sales slowed to +2.8% Y/Y in November from +7.5% Y/Y.

MACRO TRADE IDEAS:

 

 

GLOBAL CENTRAL BANK SCORECARD:

 

 

WEEK IN REVIEW – BEST & WORST PERFORMERS:

S&P 500 SECTOR PERFORMANCE:

 

 

BEST/WORST PERFORMING WORLD BOND MARKETS:

 

 

BEST/WORST PERFORMING GLOBAL STOCK MARKETS:

 

 

CURRENCIES PERFORMANCE:

 

 

COMMODITIES MARKET PERFORMANCE:

 

 

MAJOR GLOBAL STOCK MARKETS:

 

 

MAJOR GLOBAL BOND MARKETS:

 

DISCLOSURE APPENDIX

This publication is for Institutional Investor use only and not for distribution to the general public. The comments herein are based on the author’s opinion at a particular point in time and may change at any time without notice. Merion Capital Group does not guarantee the accuracy or completeness of the information contained herein. Merion Capital Group is a FINRA-registered broker-dealer. Merion Capital Group shares in the commissions for trades that are executed through Tourmaline Partners, LLC, a FINRA-registered broker-dealer. This report is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. It does not constitute a general or personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors. Past performance is not a guarantee of future performance. All investments involve risk, including the loss of all of the original capital invested.

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